Uncle Sean's Update - 12/3/21

Happy Friday!!!
 
Welcome to December!  As always, be sure to sign up here to have the Uncle Sean Update sent straight to your inbox each week.  Here is the Uncle Sean Update for 12/3/21:

• Ugh – a new aggressive Covid variant (Omicron) has surfaced.  No, no, Uncle Sean is not covering vaccine mandates, mask wearing, or the political divisions that come with all that wonderfulness.  But I am zeroed in on the statements this week from Federal Reserve Chairman, Jerome Powel and Treasury Secretary, Janet Yellen during Senate Banking Committee testimony.  Some key points:
  • Omicron variant is a concern to the economy – the Fed will be monitoring data over the next few weeks
  • Powell went on to state, “at this point, the economy is very strong and inflationary pressures are higher, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at the November meeting, perhaps a few months sooner…”  Powell expects to discuss accelerating the pace of the taper program at the December FOMC meeting (Dec 14-15).
  • Regarding the word “transitory” in relation to inflation, Powell clarified that, “it’s probably a good time to retire that word and try to explain more clearly what we mean.”
  • Powell also stated that the widely expected report on central bank digital currencies should be ready in the coming weeks

 

• The Federal Reserve November Beige Book, released this week, also reported strong wage and employment growth in nearly all Districts along with price increases stemming from strong demand, logistical challenges, and tight labor markets.

 

• The Federal Reserve Bank of New York launched the New York Innovation Center (NYIC) as part of a strategic partnership with the Bank of International Settlements (BIS) Innovation Hub with a mission to engage with “public and private sector experts to validate, design, build, and launch new financial technology products and services for the central bank community.”  Check it out at NYIC for more info.  During the virtual event (57 minute video), Chairman Powell stated, "In particular, the partnership will support our analysis of digital currencies--including central bank digital currencies," adding that the center would focus on making cross-border payments faster and less expensive and provide new tools to help supervise financial firms.

 

• The FDIC released their Quarterly Banking Profile report for 3Q2021.  Here are the highlights (all positive in my opinion): 
  • Net Income increased by 35.9% YoY, but was largely due to the decline in provision expense.  ALLL as a % of total loans is still elevated at 1.69% versus 1.18% from 4Q2019 (pre-pandemic) which is good considering there is still room to release, but we are still well provisioned against Omicron uncertainty.  Most importantly, noncurrent loan balances continue to decline – down 6.3% from 2Q2021 and down 19.2% YoY.
  • Net Interest Margin FINALLY began to increase to 2.56% – WOOHOO!!!!!  Albeit only 6 bps over 2Q2021 (which was a record low), but we’ll take it!
  • Loan growth showed up!!!  Okay – it was only 0.6% increase over 2Q2021, but it’s a win!
  • Noninterest Income continues to increase with higher interchange fees as the driver
  • Deposits are still growing (I was a little surprised by this for the quarter) and are up 2.3% over 2Q2021 and 12% YoY
  • Only 46 banks on the problem bank list which I believe is the LOWEST EVER!  In comparison, here at FedFis (here comes my shameless plug) we are tracking 73 banks in the bottom 1% per our FedFis Rating© and 42 banks with a rating of 3.80 or worse (1.00 – 5.00 ratings scale where 1.00 is best).  Shout out to the FedFis Analysis Team – you guys are ROCKSTARS!!!!

 

• Capital One becomes the latest (and the largest) U.S. bank to eliminate all consumer overdraft fees stating that the move will cost the bank about $150M in fee income per year. 
  • Ironically (cough, cough, cough - LOL), the Capital One announcement came out the very same day the CFPB released their research report on Banks' Deep Dependence on Overdraft Fees.  “Rather than competing on quality service and attractive interest rates, many banks have become hooked on overdraft fees to feed their profit model,” said CFPB Director Rohit Chopra. “We will be taking action to restore meaningful competition to this market.”

 

• Ole Jack Dorsey exits as Twitter CEO (this is me yawning)….  The good news is that he is now free (i.e. “distanced”) from that social media outlet that has evolved into the equivalent of a ‘pit of snakes, den of thieves, hate speech haven, alleged algorithmic harassment narrative, and political dumpster fire via hidden identities’ platform otherwise known as Twitter (dang – did I go too far there - LOL).  The point is that Mr. Dorsey can now completely focus on Square….   Err – I mean Block….  Yeah, Square is now Block…..  What is it with these new payment platforms and their linear correlations – Square, Stripe, Block, Plaid……????  Oh – and Square Crypto is now Spiral (now we broke that linear mold).  Confused yet?
  • Remember when Prince changed his name to that unpronounceable symbol that has yet to be identified???  Yeah, that was weird too – LOL!!!  But Uncle Sean still loves some Purple Rain! 😊

 

• The ICBA and The Venture Center announce the selection of 11 companies for the fourth annual ICBA ThinkTECH Accelerator program kicking off on January 11, 2022.  FedFis executives are mentors in this program and are huge supporters of the ThinkTECH Accelerator program each year.  Take a look at this years’ lineup:
  • Accrue360 – loan origination/business and consumer account opening, integration-as-a-service
  • DocFox - business account opening automation
  • KlariVis – data and business intelligence
  • LemonadeLXP – learning experience/digital adoption
  • Quilo – instant personal lending
  • Senso – proactive lead generation for retail mortgages
  • Sequretek – cybersecurity
  • Signal Intent – next generation financial guidance
  • Unifimoney – investing and money management
  • Vero Technologies – inventory finance platform for small-to-medium businesses
  • WealthStack – small-to=medium business focused financial wellness platform

 

• MOCA Financial and DCI enter into a joint marketing and referral agreement providing an “innovative solution featuring MOCA’s Digital-First NextGen Card-Based Payment Platform integrated with DCI’s advanced core processing and iCoreGO® account opening and funding product set.”  This is clearly a win-win for community banks that are ready to step up their competitive advantage as not only does this integrated solution work well for traditional ‘brick and mortar’ settings, the combined tech stack can also power up a Direct Bank (i.e. digital branch) under the bank charter.  Very cool!!!!

 

• OppFi entered into a Settlement Agreement with the District of Columbia alleging the company charged interest well above the Districts 24% usury cap.  As per the settlement, OppFI will pay $250K to the District, plus $1.5M in restitution, and waive $640K in accrued interest owed by those borrowers.  OppFi chose to resolve the matter "to avoid the expense of protracted litigation," and denies D.C. Attorney General Karl Racine’s charge that it engaged in deceptive or unfair practices.  Banking Dive has a good summary and additional insights into the recently rescinded “true lender” rule.

 

• Notable FinTech funding for the week (follow the money):
  • Fundbox (SMB lending and cash mgmt. platform) raised $100M in Series D funding round at a $1.1B valuation
  • Thought Machine (cloud-based core platform) raised $200M in Series C funding with a valuation north of $1B
  • CertiK (blockchain security / smart contract auditing firm) raised $80M in Series B2 at a $1B valuation citing 20x YoY revenue growth
  • CyCognito (cybersecurity operations platform) raised $100M in Series C round.  Valuation was not disclosed but the company has generated “400 percent growth in year-over-year revenue” in addition to growing its “Fortune 500 customer roster by 3x—underscoring worldwide demand for its leading Attack Surface Management platform.”
  • Panther Labs (cybersecurity) raised $120M in Series B funding with a $1.4B valuation
  • Solutions by Text (text messaging platform for consumer financial services) raised $35M in growth financing.  Over “1400 consumer finance organizations, including leading auto finance, banking and lending brands, trust Solutions by Text (SBT) to power compliant texting programs in support of their originations, servicing and collections initiatives.”
    • Pretty relevant when you consider the Updated Fair Debt Collection Practices Act (FDCPA) Regulation F rule that went into effect on 11/30/21.
  • Algofi (decentralized lending on the Algorand blockchain) raised $2.8M in Seed funding and intends to launch its lending and stablecoin protocol in December
  • Goalsetter (family and K-12 PFM banking app) raised $15M in Series A funding round.  With this new funding, Goalsetter is looking to move from B2C to B2B by promoting this as a white-label co-branded solution to FI’s via an onboarding partnership with Fiserv.
  • Victor Technologies (MVB Financial BaaS Subsidiary – cool model by the way) raised $6M in Seed funding to enhance their API and risk management solutions – as well as their proprietary virtual account ledgering solution.  Check them out at victorfi.com.

 
 
Random Uncle Sean Stuff:

• 22 days until Christmas Day!!!!!!!!  Check out this video of the 2021 lighting of the Rockefeller Christmas Tree.
• A special HAPPY BIRTHDAY shout out to our eldest son Marshall this week!!!!!!!  Mom and Dad are proud of you!!!

• And a few Holiday Dad Jokes for you:
  • The 4 stages of a man’s life: 1. You believe in Santa, 2. You don’t believe in Santa, 3. You are Santa, and 4. You look like Santa (I am here - LOL)
  • What do you call Santa’s helpers?  Subordinate clauses…..
  • What did Adam say the day before Christmas? “It’s Christmas, Eve!”
  • Lastly – I asked Aunt Patty what she would like for Christmas.  She told me, “nothing would make me happier than a diamond necklace.”  So I bought her nothing…  LOL!!!!!

 
 
Have a GREAT weekend and please stay safe!!!
 
Uncle Sean
 
 
Sometimes known as Sean Mayo – contact me directly for scope and pricing of custom reports / analysis projects at [email protected] | 214-604-6961 – or you can contact FedFis Sales Team at 512-960-0911 | [email protected] #FedFisHasTheData FedFis
 
FedFis, LLC disclaimer – The views and opinions of Uncle Sean are of his own and may not necessarily represent the views, endorsements, and/or opinions of FedFis, LLC – we all know he’s a little bit different; but that’s why we love him.